Ok, this is all getting a bit weird. First we heard from bank economists, Flaherty and the PM – the general message tended towards caution: don’t buy what you can’t afford, make sure you can handle rising interest rates, we’ll keep an eye on the Canadian housing market to make sure it doesn’t get too bubbly, that kind of thing. Now we’ve got more warnings showing up in the mainstream press, but these are a lot more direct:
“If you’re somebody in a situation that you have only five per cent down and you’re stretching to get in the market with a 35-year amortization, I think that would be a very precarious situation right now,” said BMO Capital market economist Robert Kavcic.
Conversely, he said, “if you’re sitting on a pile of cash and looking to move into the real estate market, it would almost be a no-brainer to just wait for lower prices.”
Mr. Kavcic isn’t the only one in that article that thinks buying right now would be a mistake:
“It’s absolutely not debatable that housing prices cannot rise faster than incomes over the long term,” said Will Strange, professor of real estate and urban economics at the Rotman School of Management.
Sooner or later, incomes have to rise, or home prices fall, for balance to be attained.
Many analysts argue that home prices are not yet out of line with the incomes it takes to pay for them, Strange said. Yet with the job market still weak, and unlikely to drive new employment and higher wages, odds are that if something’s got to give, it will be prices.
“If I didn’t personally have most of my wealth tied up in housing, this would not be the time that I would choose to jump in,” Strange cautioned.
Now keep in mind these comments refer to the national Canadian real estate market where house price increases are starting to outpace incomes in many cities. Here in Vancouver things are different: house prices have been outpacing incomes for years.